The End of the Twinkie? Hostess Plans to Go Out of Business

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Hostess Brands Inc., the bankrupt maker of Twinkies snack cakes and loaves of Wonder Bread, is seeking a U.S. court's permission to go out of business after failing to get wage and benefit cuts from thousands of its striking bakery workers.


The 82-year-old Hostess, which has about $2.5 billion (USD) in sales and is one of the largest wholesale bakers and distributors of breads and snack cakes in the United States, filed the request with the U.S. Bankruptcy Court in New York early Friday (November 16) morning. A hearing on the matter is set for Monday.


The Irving, Texas-based company said the liquidation would mean that most of its 18,500 employees would lose their jobs. Hostess immediately suspended operations at all of its 33 plants across the United States as it moves to start selling assets.


A group of workers at Drake's, a bakery owned by Hostess in Wayne, New Jersey, gathered outside the business after the news was announced. The men said they had started working at the bakery at 0600.


"It was coming. Everyone knew there was something going on, but the way I figured there was going to be a strike or something. Then around 8 o'clock this morning, they just said, 'Shut everything down. Everybody out of the building.' Just like that. They are liquidating and that's what happened," said Tom Snyder, now a former employee at the bakery.


Kevin Naysmith, a former mechanic at the plant, added, "It's going to be a lot more places and not just Hostess going to be doing this. They just broke this and now other companies in the baking industry are going to try to do this to their employees and it's a shame. It ain't like we are making 25-30 dollars (USD) an hour either. Most of us ain't even making 20 dollars an hour."


Waldin Turner, who had worked as a mechanic in the bakery for about 25 years, was more contemplative.


"Life goes on you know. Life goes on. Life goes on, you know. There a bumps in life, you got to keep going, just can't stop. That's what's great about America, you don't sit down, you keep moving. One door close, another one opens," he said.


Hostess's top-selling products are its chocolate cupcakes, Twinkies cakes and its powdered sugar and frosted "Donettes."


Hostess products, particularly the golden, cream-filled Twinkies cakes, are deeply ingrained in American pop culture.


Hostess blamed burdensome wage and pension obligations for its financial woes. It said a strike by members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which began November 9, was the latest in a series of labor troubles that had crippled the company's ability to produce and deliver products at several facilities.


But union officials and line workers said the company had failed to invest in new technology, brand marketing and modernization of plants and trucks and had focused instead on enriching owners such as private equity firm Ripplewood Holdings and hedge funds that include Silver Point Capital.


Ripplewood and Silver Point officials declined to comment.


"I don't think it was a labor dispute that was the only thing at issue here. Hostess has been having problems for several years now. Some of it's natural. They've got kind of an old product, stable demand and remember commodity prices went up too, so all their sugar costs and all of that stuff went up. The recent dispute with their labor unions has really been more of a consequence of Hostess desperately trying to cut costs," said Mike Davis, a professor of economics and finance at Southern Methodist University's Cox School of Business.


Hostess had given employees a deadline to return to work on Thursday, but the union held firm, saying it had already given far more in concessions than workers could bear and that it would not bend further.


The company was asking workers to agree to an 8 percent pay cut, a 20 percent increase in healthcare costs, closure of 10 to 12 plants and changes to pension and workday provisions.


Union leaders at the International Brotherhood of Teamsters, one of a dozen unions representing Hostess workers, said it was management who brought the company down.


"The union had a choice. They could have given in on the wage and pension concessions. The question the union had to ask was 'Would that have really helped?' or was Hostess just so far gone that there was not much at all that could be done," said Davis.


Hostess has 565 distribution centers and 570 bakery outlet stores, as well as the 33 bakeries. Besides Twinkies and Wonder Bread, its brands include Nature's Pride, Dolly Madison, Drake's, Butternut, Home Pride and Merita.


"I'm pretty sure that that brand is so well known that someone's going to buy it and produce Twinkies. I can't image a world without Twinkies," added Davis.


The company said in Friday's court filing that it would probably take about a year to wind down. It will need about 3,200 employees to start that process, but only about 200 after the first few months.


Hostess had been gauging acquisition interest for certain brands for months and in late September received "a number of potentially viable proposals" to purchase certain assets.


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